Since Gov. Arnold Schwarzenegger ousted former Gov. Gray Davis two years ago, the Republican politician has made improving California’s business climate a top priority.
After a stinging defeat on a handful of business-related propositions in the fall, Schwarzenegger has taken a conciliatory approach to the job that he hopes to keep when he runs for re-election this November.
The governor, in his State of the State speech and budget announcement earlier this month, unveiled what he considers an ambitious plan to pump more than $200 billion into the state’s infrastructure over the next decade through the sale of bonds. He also has called on the Legislature to pass a $1-an-hour hike in the minimum wage, and spend billions of dollars on education.
He has urged the federal government to allow the state to import prescription drugs from other countries. And there may be more changes in store for the overhauled workers’ compensation laws, as some businesses and government insiders still complain that premiums remain higher than in most other states.
The Business Journal earlier this month spoke with several state legislators who represent Orange County. They talked about the business-related issues that they expect to make news this year.
The three state senators and seven of the nine state assembly members that represent parts of OC spoke to the Business Journal.
Assemblymembers Rudy Bermudez, D-Norwalk, and Mimi Walters, R-Laguna Niguel, did not respond by the deadline to the Business Journal’s request for interviews.
Sen. Joe Dunn
(D-Garden Grove)
In 2006, I intend to focus on legislation that improves the competitiveness of California’s markets by updating state antitrust law.
This is long overdue in California since there are now industries that dominate the market so overwhelmingly that they prevent the entry of new competitors.
The gasoline industry is a prime example of this problem.
As always, I prefer to see a market response to existing problems. For example, oligopolies are often broken by the entry of new competitors in the market that bring a new supply of the product. This creates new capacity that, under normal market rules, will cause the members of the oligopoly to begin competing.
This is not happening in the California gasoline market. According to documents produced by the oil companies, they took numerous steps to protect their oligopoly from new competition. They virtually eliminated independent dealers from the market, and thus, other suppliers of gasoline have no avenue of entry into the market. In addition, they actually purchased unexpected supplies of gasoline (e.g., from South America) at a loss and shipped it elsewhere just so it could not find its way into the California market. Under these conditions, the market simply cannot correct itself. The dysfunctional behavior by a few players is so powerful that the lack of competition becomes permanent.
There are two specific fixes to state antitrust law that I would like to see enacted this year. First, the Legislature should make it harder for corporate defendants to get a state antitrust case dismissed before the case goes to trial. Second, because federal law barring monopolies is so poorly enforced, the state should enact its own statute expressly outlawing monopolies.
By enacting these fixes to state antitrust law, California would help restore competitive markets in areas such as gasoline and energy, where currently they don’t exist.
Sen. Dick Ackerman
(R-Tustin)
It is no surprise to us in Orange County that California’s infrastructure is in dire need of an overhaul. Our highways and schools are overcrowded, water delivery systems are aging and the decaying levee systems in Northern California are threatening Southern California’s water supply.
I support the governor’s call for investing resources in California’s water, transportation, education and port infrastructures and I support implementing a strategic plan for meeting California’s immediate and future infrastructure needs. However, a strategic plan must be predicated on realistic priorities that will not bankrupt our economy.
For far too long, important projects have been delayed or ignored by policy-makers in Sacramento. What is worse, when Sacramento decides to act, it takes decades to get through the red tape and billions are squandered on projects designed to bolster public opinion, not public infrastructure.
The state has spent billions of dollars and 15 years building a bridge that’s still not completed. The past five water bonds have spent over $11 billion dollars, but only 3% of that (was spent) on the levees that protect our citizens and our water supplies.
Any strategic plan for rebuilding California must include fundamental reforms designed to cut through all that red tape, streamline the permitting and construction process and ensure we get the most bang for the buck.
The cost of repairing levees has been estimated at $2 billion by the Department of Water Resources. Over the past 20 years, the repair cost per linear foot has risen from $300 to upward of $10,000. The vast majority of this increase is attributed to environmental permitting and mitigation costs.
Furthermore, any strategic plan must also ensure that every single dollar raised for infrastructure be spent only for the construction of that critical infrastructure. We cannot afford to burden future taxpayers with pork projects.
I commend the governor for taking the lead in advocating for infrastructure investment, his continued stance against increasing taxes and his fiscally prudent call for a cap on the amount of debt that can be issued for any purpose.
Sen. Bill Morrow
(R-San Juan Capistrano)
California’s business climate may not be on life support, but it remains in critical condition.
Gov. Schwarzenegger deserves credit for helping turn the economy around. He’s whittled away at our structural budget deficit. But, we’re still hopping around on one sore leg when we should be sprinting with two healthy ones.
Overtaxation of businesses and consumers is a huge drag on the economy. And overtaxation is directly tied to the runaway spending that always seems to devour whatever new tax revenues are generated.
We need an appropriations limit that controls this runaway spending and is not directly subject to annual shifts in the political winds. The old “Gann Limit” was effective at that task; therefore, I am introducing a constitutional amendment very similar to the one (SCA 16) that Sen. Tom McClintock and I jointly authored in 2004. It would index the expenditure limit to the Consumer Price Index (CPI).
California needs a major infrastructure overhaul,roads, power plants and transmission lines, water storage, schools, etc. The governor recently expressed his vision for infrastructure renewal. It’s an investment we desperately need, but we must be careful how we fund it because over-reliance on bonds threatens our state’s economic health. Our debt-service ratio has fluctuated from 3% to 5.5% in recent years, but already is projected to shoot as high as 7% during the next few years.
I’m also dedicated to blocking the growing campaign to reverse the hard-earned bipartisan workers’ comp reforms of 2004. The reforms have helped tremendously, even if they were not as comprehensive as I would have liked. The Workers’ Compensation Insurance Rating Bureau (WCIRB) reports that, for employers, the average cost per $100 of payroll fell to $4.42 during the first nine months of 2005,the lowest since early 2002 when the rate stood at $4.39. (In comparison, the WCIRB has reported that rates peaked at $6.46 per $100 of payroll in July 2003, the highest in the nation.)
According to filings with the Department of Insurance, carriers plan to cut rates by an average of 15.03% this winter. Insurers have slashed rates a cumulative 37.8% since the reforms took effect in early 2004.
Throw out those reforms and encourage again other states to headhunt our best employers and employees? Over my dead body.
But I’m optimistic that we’ll continue moving forward with a positive agenda. Everything Californians want is premised on a sound economy and healthy business climate.
Assemblywoman Lynn Daucher
(R-Brea)
California’s students once were worldwide leaders in math and science. The technological revolution began in our own Silicon Valley, spurred on by innovation championed in California’s schools. Many things we now take for granted and rely upon, from computer hardware and software to microprocessors and many household dot-coms like Google, Yahoo! and eBay, were developed here in the Golden State.
In this new “Internet-Powered World,” it is unquestionably essential that our students develop the math and science skills required to compete in the 21st century.
The National Science Foundation recently reported that California’s eighth graders scored last in the country in sciences and seventh from the bottom in mathematics. So while today’s knowledge-based global economy depends upon a scientifically and mathematically literate workforce, our students are falling dangerously behind.
I am committed to working with industry leaders and educators in our state to help students achieve the level of success that will keep America competitive in the global economy. Offering engineering classes at the high school level, as Massachusetts is now doing, is a first step to getting students interested in a field that is growing four times faster than any other.
Jobs requiring science, engineering and technical training will increase 51% over the next 10 years. To fill these positions, our students need access to cutting-edge equipment. Laboratory infrastructure is key to hands-on learning and to ensuring workforce readiness. Unfortunately, facilities at most of our universities are 20 to 30 years old, and upgrades are badly needed.
This month, I will be co-hosting a Technology Summit at Cal State Fullerton, where industry leaders in our state will sit with educators and legislators to define the infrastructure needs of our state’s technical programs and to address the need for increasing the talent pool entering these fields of study.
A new generation of highly trained innovators is waiting in California’s high schools right now. Our status as the world’s technology leader is depending on them to continue the tradition of innovation California is famous for. Providing the infrastructure for them to excel in the technical fields should be job No. 1 for California’s leaders.
Assemblyman Chuck DeVore
(R-Irvine)
California is at a crossroads in 2006. After winning the recall election in 2003, Gov. Schwarzenegger immediately cut the car tax that Gray Davis tripled. In spite of this, and with no tax increases (I would say largely because of not increasing taxes), general fund revenue to the state has soared by $10 billion to an estimated $92 billion in the coming 2006-07 fiscal year.
This economic good news is increasing pressure in Sacramento to boost expenditures by an even greater amount. Fiscal discipline, never popular in Sacramento, is becoming even more out of style.
For this reason it is vital to offer innovative solutions to California’s huge needs for more roads, water projects, flood control and schools. One such solution that will save up to $30 billion in taxpayer money while boosting the state’s economy, is authorizing the construction of a privately run truck toll road from the ports of Long Beach and Los Angeles to the Inland Empire.
Using the ongoing 600-mile Trans-Texas Corridor as a model, California should determine the route for the corridor, complete the needed permits, then auction off the right to design, build and operate the road on a lease basis. Such a road would dramatically reduce trucking bottlenecks at the ports. It would also put the damper on a competing port being proposed in Mexico, 100 miles south of San Diego.
Once built, such a road would improve traffic flow and safety along the (710) Freeway corridor, then east along the major routes: the (I-10), the (91) and the (60) free-ways. Improved traffic flow will also reduce the emissions per mile shipped,a benefit to the environment and the economy.
Another measure I’m working on is a federal tax conformity bill to exclude from businesses’ gross income payments for retired workers’ prescription drug plans. This small but needed step toward conformity with federal tax law will save businesses money while encouraging employers to provide a needed benefit to retirees.
Assemblyman Tom Harman
(R-Huntington Beach)
During this second year of our two-year session, I plan to introduce 10 to 12 bills all dealing with various topics. However, two of these measures,punitive damage awards and forfeited pay for legislators,would have a positive and significant impact on California’s business community.
Punitive Damage Awards
Each year we hear more and more about outrageous awards for punitive damages that are made by juries. It seems that for even the slightest or most inconsequential act, a jury is being convinced by a “silver-tongued lawyer” to award millions in punitive damages.
Currently, the potential size of a punitive damage award is unpredictable and the process of arriving at it is entirely arbitrary. There are no guidelines for a jury to follow in determining the amount of an award. Because of this, juries often make their determinations based on the emotional aspects of the case, not on the facts of the case.
I intend to introduce legislation in the coming year that would shift the power of determining the amount of a punitive damage award from the jury to the trial judge.
This common-sense reform would restore some sensibility to the process of how punitive damages are determined and help save California businesses, which are often the target of these outrageous awards.
Forfeiting Legislative Pay
California’s Constitution requires the Legislature to pass a state budget by June 15 of each year. The last time this deadline actually was met by the Legislature was on June 12, 1986.
When this deadline is not met because of political maneuvering and partisan politics here in Sacramento, those who suffer are the hardworking people and businesses throughout California who rely on the passage of an on-time budget for their livelihoods. Because the legislators themselves do not feel this same pressure there is little if any incentive to meet this very important deadline.
I will be introducing a constitutional amendment this year, which would require members of the Legislature to forfeit their pay if the budget is not passed on time. This would provide a major motivation for us to do the job we were elected to do, in a timely manner.
Assemblyman Bob Huff
(R-Diamond Bar)
Minimum Wage
I voted against legislation to increase the minimum wage last year (AB 48/Lieber) and I plan to do so again this year. I am even more opposed to proposals that would tie a minimum wage in-crease to automatic annual cost of living increases in future years.
Workers’ Compensation
The governor worked with the Legislature, labor and business groups to fix our broken workers’ compensation system in 2004, which had become the poison pill of California’s economy.
Businesses across our state were struggling to keep their doors open under the weight of rapidly rising workers’ compensation premiums. They were being threatened by greedy personal injury lawyers, looking to fatten their pockets off the suffering of workers.
Thanks to the governor’s reforms, rates have fallen nearly 30%, while injured workers continue to receive the medical care they deserve so they can return to work, and continue to lead productive lives.
And we recently learned that rates should continue to fall even more this year. This is terrific news.
2006 State Budget
The governor’s strong stands to date against higher taxes and job-killer bills have resulted in a strong economy producing thousands of new jobs and additional one-time revenues. I am pleased with the governor for outlining an agenda that includes no new taxes. We must not place further tax burdens on hard-working Californians. Rejecting tax increases will enable the economy to continue its strong growth and will ultimately benefit the people. The budget also emphasizes the need to invest in our long neglected transportation infrastructure. At the same time, the governor has outlined the importance of remaining fiscally responsible. As negotiations continue, we must all keep in mind that while revenues are increasing, the state continues to face a structural budget deficit.
Infrastructure Bonds
Assembly Republicans stand ready to work with the governor and our Democratic colleagues to prioritize the state’s infrastructure and education needs, while continuing to address the structural budget deficit. Identifying the most cost-effective ways to pay for important investments in our outdated infrastructure will be a challenge. I am in favor of implementing reforms to make money go farther and move faster.
Assemblyman Todd Spitzer
(R-Orange)
In his State of the State address, Gov. Arnold Schwarzenegger outlined an aggressive strategic growth plan for our state. Included in this proposal is extensive funding for transportation, water quality and supply, and important infrastructure that has gone ignored for too long.
Investments in California’s infrastructure system would continue to improve California’s economy by creating new jobs, increasing mobility for working Californians who waste valuable time on congested freeways and addressing the reduction of bottlenecks that delay the movement of goods through our state.
This proposed investment in California’s infrastructure provides a critical opportunity for private sector businesses to become involved in the execution of these projects.
It is safe to point out that construction jobs, and most other programs run by Sacramento, tend to be bureaucratic boondoggles. The private sector has proved itself to be the most effective, reliable and accountable means of, among other things, freeway construction. Just look at the (22) Freeway that is scheduled to be completed in approximately 320 days (800 days total from beginning to end). When has the state ever completed a project so quickly or ef-ficiently? Never.
Businesses in this state cannot be complacent or Sacramento will overlook their intrinsic value. We all know how aggressive and politically active special interest groups are in Sacramento. It is time that the business community steps up to the political plate.
This legislative year promises to be controversial as the governor is proposing a complex and costly long-term strategic plan for improving our state. Businesses continue to be the backbone of our economy and must remain a top priority as we debate our future.
As in years past, I will continue to fight to ensure that Sacramento continues to demonstrate the same fiscal discipline we have exercised over the past two years, including increasing funding to vital programs without raising taxes. We cannot afford to build our state on the backs of the businesses that keep our state solvent. Real reform comes only when the needs of businesses are not sacrificed to the greedy demands of special interest groups.
Assemblyman Tom Umberg
(D-Anaheim)
Traditionally, the focal point of post-high school education in California has been the pursuit of an advanced degree. However, in the last few years, due in part to the aggressive involvement of the state’s business community, we have seen a renewed interest in education, particularly stronger career technical education (CTE). For example, the Santa Ana Chamber of Commerce has even gone so far as to work with the Santa Ana Unified School District in an attempt to help create a new public high school dedicated to career technical education.
Not every high school student is interested in attending college. Nor is everyone cut out for it. Many are interested in more specific and focused training. Absent a commitment to CTE, many students will unfortunately not be provided with the opportunity to ensure their success in the job market after they graduate from high school. Sadly, many high-paying, high-value-added jobs go unfilled.
As our economy has changed from an industrial-based economy to a high technology and service economy, there is a greater need than ever to provide educational programs that allow students to prepare for these types of careers. Unfortunately, the number of high school CTE courses has declined more than 22% in the last 15 years. A new investment in high quality, rigorous CTE courses is essential if California is to stay competitive in an ever evolving global economy.
This last year I partnered with superintendent of public instruction Jack O’Connell to author AB 1089, to accomplish just such a goal. AB 1089 will create statewide accountability by requiring school districts to adopt quality criteria for their CTE courses. The bill will ensure that before students exit high school or community college, they have the opportunity to take high-quality courses that offer workforce training integrated with core academics concepts. The bill was sponsored by the Orange County Business Council.
Fortunately, state government is beginning to understand how CTE benefits California’s business environment. Last year, the governor and the Legislature took an important step by investing a total of $20 million. This year the governor has included an additional $50 million for CTE in his just released 2006-07 state budget.
Although progress is being made, much more needs to be done. A working partnership with the business community will keep the need for the dedication of more state resources and better quality CTE a part of the state Legislature’s discussion regarding education financing. I look forward to continuing that important partnership this coming year.
Assemblyman Van Tran
(R-Costa Mesa)
When I consider the regular expenditures of my family, I have to take into account the money we earn and the commitments we have,car payments, mortgage, insurance and power bills. Some regular luxuries are thrown in like cable service and newspaper delivery. After we’ve covered these responsibilities, my wife and I can look at other options. Maybe we’ll upgrade to the HBO subscription, or I can take her out to a nice dinner.
Here the fundamental idea is that we first consider how much money we have before we commit to new spending. If we want to go on vacation, we make sure to prepare by saving. Now I don’t want to be disingenuous,there have been times where we’ve spent more than we had. But we always recovered by restraining our spending after. Maybe the washer breaks and we are suddenly confronted with an unanticipated $600 expense. Some debt is accrued and paid off gradually in the forthcoming months.
Sadly, government works nothing like this.
State revenue is currently in the middle of a boom. The national and state economies have had robust growth the last few years and have resulted in solid increases in revenue for the state. Having continued growth for a number of years is exactly the scenario necessary to overcome the horrible deficits of the Gray Davis years.
Instead our government continues to grow. It’s like there is a race, always trying to keep expenditures ahead of revenue. This just makes no sense.
I have argued before that the core of budgeting is setting of priorities. There are a lot of things that legislators want government to do, but a responsible budget should first decide what our priorities are and then pay for what we can afford.
California is close to passing the ugly times we had when the dot-com bubble burst. We just need to cut out the HBO a little longer.
